The short term outlook for the RBA is now pretty clear – it’s for a period of steady policy rates (at 3.5%) … Europe / global backdrop permitting.
How can I say this with confidence? Because with the release of Q2 CPI, we know the direction of revisions to the RBA’s Q2 SOMP in the Q3 SOMP – and despite what some claim, the RBA is a pretty predictable central bank (they move when their forecasts are moving).
We already knew GDP has been stronger than the RBA expected (assuming +0.6%q/q for Q2 real GDP, YoY in Q2’12 will be 3.5% a full 75bps above the RBA’s Q2 SOMP forecast).
Gov Stevens told us in the Q+A following the Lucky Country speech that the unemployment rate was lower than they had expected.
And now that we have Q2, we can see that inflation is exactly as the RBA expected.
On the negative side, global growth is perhaps a little weaker than the RBA expected in their Q2 SOMP.
Relative to the Q2 SOMP, the financial markets stuff looks like a wash to me. The AUD is around their Q2 SOMP assumption of 1.03, the TWI is a little stronger at 77.7, but TAPIS is a little weaker at ~110/bbl.
Toting it all up, i would be surprised if these forecasts changed much at all in the Q3 SOMP.
Until these forecasts change – I am tipping that RBA Gov Stevens and his Board will continue to judge that monetary policy is ‘about right’.